In recent years, under the impact of the epidemic, international trade protectionism, the outbreak of war, and other multiple factors, there is a chip shortage in the automobile industry, especially the structural chip shortage that has been plaguing auto manufacturers. Even after the reversal of supply in 2022, the shortage of car chips has not been effectively resolved.
According to McKinsey & Boston Consulting Group (BCG), the shortage of car chips has yet to be fully resolved and could last until 2026 or even 2030.
While foundry chip factories have been ramping up their 28nm capacity to meet the rising demand for some mature process chips, the two consultants stress that higher-end electronic components for different applications in cars will remain in short supply. Under the hot trend of new energy vehicles and autonomous driving, the major car enterprises in the world will continue to face the problem of chip shortage, especially the structural chip shortage in the short term.
Chip shortage hits auto supply chain
Oliver Zipse, chief executive of BMW, told the Swiss daily newspaper: ‘We are still in the height of the semiconductor chip shortage.’
I expect us to start seeing improvements at the latest next year, but we will still have to deal with a fundamental shortage in 2023.
However, relative to BMW’s chip shortage, Toyota has been cutting its annual vehicle output targets. On Oct. 21, Toyota is expected to cut its global production target of 9.7 million vehicles for the current fiscal year (April 2022 to March 2023), the first time it has acknowledged it will miss the target.
In May, Toyota said it was cutting its June global production target by about 100,000 vehicles to about 850,000 vehicles because of a semiconductor shortage. Still, the company said its global production target of about 9.7 million vehicles for the fiscal year ending next March was unchanged.
In September, Toyota officials announced plans to produce about 800,000 vehicles worldwide in October, down about 100,000 from its scheduled monthly target, because of the chip shortage. Still, Toyota maintained its full-year production target of 9.7 million vehicles.
In October, Toyota said it was assessing the impact on future production and would release a revised production target once the outlook became clearer. Toyota, meanwhile, blamed a shortage of semiconductor chips for the production cut.
In addition to Toyota, SAIC Motor also said that the type and quantity of automotive chips are related to specific models. The company is selling major models of chips in a wide variety and large quantities, and currently, the global supply of automotive chips is still in structural shortage.
SAIC said that in the face of the risk of energy shortage in the manufacturing industry in Europe and Germany, currently SAIC Volkswagen has no parts directly affected by the energy shortage, and the company has increased its attention to the continuous supply ability of suppliers. Currently, the supply of imported parts is mainly affected by the global chip shortage. The company has actively seized chip resources, improve inventory reserves, and strive to make the risk in a controllable range.
According to Volkswagen, chip shortages will not end in 2023 and it believes supply chain disruptions will become the norm, adding that it will seek to work with semiconductor manufacturers to develop chips to be more flexible in dealing with shortages.
In February, a chip shortage cut production at VW’s Wolfsburg plant, the world’s largest car production plant with a maximum capacity of nearly 4,000 units a day, when it introduced an early monitoring system that helped it identify 150 alternatives to its semiconductor chips.
Car chip shortage will be alleviated
For now, signs that the shortage of automotive semiconductors is easing, especially after this year’s oversupply of consumer electronics chips, are bound to help some chip makers switch production lines to cars that are still lacking cores. As a result, many industry analysts and automakers were optimistic that 2023 would bring relief for automotive chips.
Entering October, however, the chip shortage remained the biggest obstacle to incremental production. This is why McKinsey & Company and Boston Consulting Group (BCG) predicted that the shortage of automotive chips will last until 2026 or even 2030.
According to feedback from many automobile enterprises, the overall shortage of automobile chips has eased somewhat, unlike the previous shortage of all kinds of chips, but there is still a structural shortage of chips, especially since the supply of automotive-grade chips will be tight for a period of time to come.
- The market for analog chips will grow and supply is virtually guaranteed;
- There will be no shortage of driver and MOSFET chips;
- PMS, Bluetooth chip supply has eased, but has not reached the balance between supply and demand;
- High-end chips, MCU class chip supply is still very tight.
It is reported that in the high-end chip market, the delivery cycle of high-end chips of NXP, Infineon, and STMicroelectronics is more than 40 weeks, and some orders are even scheduled for more than a year.
As a result, the overall shortage of automotive chips has eased, but shortages of some core high-end chips are bound to affect vehicle shipments as well. In other words, as long as the shortage of some high-end chips is not effectively resolved, the global car production line will remain “stagnant”.
According to Boston Consulting Group, the automotive semiconductor market is expected to grow more than 9 percent annually through 2030, as the adoption of electric vehicles and advanced driver assistance systems (ADAS) will increase the use of chips in vehicles. Meanwhile, based on the fact that pure electric vehicles will become the mainstream in 2026 and require more semiconductor components, it is expected that by 2026, the chip shortage related to analog and MEMS will become a major challenge for the automobile industry. In addition, the requirements of automotive-grade chips for performance index, service life, reliability, safety, and quality consistency are very high. This will also lead to the new entry automotive-grade chip manufacturers can not enter the automotive supply chain in the short term. In response, Black Sesame Technologies said:
The mass production of chips is very difficult. It takes about 18 months from the joint architecture design to the development and production of chips. After that, the packaging starts testing, including functional testing, AEC-Q100 automotive electronics testing, various tests with Oems and suppliers, and software iteration and system upgrade of products. Final mass production will take 42 months, which is a regular time cycle.
Reshaping the industrial chain
With the development of electric and intelligent vehicles, the proportion of chips in the value of a single bike is increasing. In particular, electric vehicles and driverless vehicles have greatly increased the number and value of chips in cars. McKinsey analysis suggests that overall automotive chip revenues could rise from $41 billion in 2019 to $147 billion in 2030. Autonomous driving, connectivity, and electrification are the three pillars driving demand growth, with a combined revenue of about $129 billion, or 88% of the total market volume.
McKinsey also forecasts that annual demand for automotive semiconductors could increase from about 11 million 12-inch wafers in 2019 to 33 million wafers in 2030, representing a compound annual growth rate of 11%. Most future automotive wafer requirements will involve process nodes of 90 nm and above, as many automotive controllers and electric powertrains, including electric drive inverters and actuators, rely on these mature chips. Such chips will account for about 67% of vehicle demand in 2030. While global semiconductor companies are ramping up chip production, McKinsey’s analysis suggests compound annual growth will remain at about 5% from 2021 to 2026, insufficient to cope with the shortfall in supply and demand.
In response to the chip shortage, the United States, Europe, Japan, and South Korea have adopted different strategies to ease their own chip shortages and further strengthen their control in the manufacturing process.
- The United States is taking advantage of the shortage of automotive chips to further strengthen its global control over chip manufacturing.
- Europe reinforced its lead in automotive chips;
- In Japan, the main automobile enterprises build “safety inventory” by using the downward production mode to build a resilient supply chain.
- South Korea, with its advantages in memory semiconductors, is cooperating with automakers to build new advantages in system-level chips.
Currently, in the field of autonomous driving chips, foreign brands such as Nvidia, Intel-owned Mobileye and Qualcomm dominate the major market. According to market research firm IC Insights, less than 5 percent of chips will be made in China in 2021.
In the next few years, global auto companies will still face the “pain of chip shortage”. They need to rethink their supply chain models, such as strengthening in-depth cooperation in the supply chain and making medium – and long-term development plans to cope with the shortage of automotive chips and further reshape their own industrial chain advantages.
